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TPL > SEC Filings for TPL > Form 10-Q on 6-Aug-2013All Recent SEC Filings

Show all filings for TEXAS PACIFIC LAND TRUST | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for TEXAS PACIFIC LAND TRUST


6-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read together with (i) the factors discussed in Item 1A "Risk Factors" of Part I of our Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2012, (ii) the factors discussed in Part II, Item 1A "Risk Factors," if any, of this Quarterly Report on Form 10-Q and (iii) the Financial Statements, including the Notes thereto, and the other financial information appearing elsewhere in this Report. Period-to-period comparisons of financial data are not necessarily indicative, and therefore should not be relied upon as indicators, of the Trust's future performance. Words or phrases such as "does not believe" and "believes", or similar expressions, when used in this Form 10-Q or other filings with the Securities and Exchange Commission, are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.

Results of Operations for the Quarter Ended June 30, 2013 Compared to the Quarter Ended June 30, 2012

Earnings per Sub-share certificate were $.71 for the second quarter of 2013, compared to $.59 for the second quarter of 2012. Total operating and investing revenues were $9,953,933 for the second quarter of 2013 compared to $8,706,738 for the second quarter of 2012, an increase of 14.3%. This increase in revenue and earnings was due primarily to an increase in oil and gas royalty revenue and, to a much lesser extent, easement and sundry income. These increases were partially offset by a decrease in land sales and, to a much lesser extent, a decrease in interest income on notes receivable.

In the second quarter of 2013 the Trust sold approximately 43.7 acres for a total of $218,588, or approximately $5,000 per acre. In the second quarter of 2012 the Trust sold approximately 1,792 acres for a total of $2,242,747, or approximately $1,252 per acre.

Rentals, royalties and sundry income were $9,592,061 during the second quarter of 2013, compared to $6,278,498 for the second quarter of 2012, an increase of 52.8%. This increase resulted primarily from increases in oil and gas royalty revenue and, to a much lesser extent, easement and sundry income.


Oil and gas royalty revenue was $6,357,782 for the second quarter of 2013, compared to $3,328,254 for the second quarter of 2012, an increase of 91.0%. Oil royalty revenue was $4,813,771 for the second quarter of 2013, an increase of 74.3% from the second quarter of 2012 when oil royalty revenue was $2,762,049. The average price per royalty barrel of crude oil during the second quarter of 2013 was 12.9% lower than the average price prevailing during the second quarter of 2012. This price decrease, however, was more than offset by an increase of 100.2% in crude oil production subject to the Trust's royalty interest in the second quarter of 2013 compared to the second quarter of 2012. Gas royalty revenue was $1,544,011 for the second quarter of 2013, an increase of 172.7% from the second quarter of 2012 when gas royalty revenue was $566,205. This increase in gas royalty revenue resulted from both volume and price increases of 112.4% and 28.4%, respectively, in the second quarter of 2013 compared to the second quarter of 2012.

Easement and sundry income was $3,081,718 for the second quarter of 2013, an increase of 11.0% compared to the second quarter of 2012 when easement and sundry income was $2,776,197. This increase resulted primarily from increases in pole line easement income, pipeline easement income, and sundry lease rental income caused by an increase in drilling and exploration activity on land owned by the Trust. This category of income is unpredictable and may vary significantly from quarter to quarter.

Interest income, including interest on investments, was $143,284 for the second quarter of 2013 compared to $185,493 for the second quarter of 2012, a decrease of 22.8%. Interest on notes receivable for the second quarter of 2013 was $140,175, a decrease of 22.3% compared to the second quarter of 2012 when interest on notes receivable was $180,489. As of June 30, 2013, notes receivable for land sales were $7,288,537 compared to $10,182,840 at June 30, 2012, a decrease of 28.4%. Interest income earned from investments was $3,109 for the second quarter of 2013, a decrease of 37.9% from the second quarter of 2012. Interest on investments is affected by such variables as cash on hand for investment and the rate of interest on short-term investments.

Taxes, other than income taxes, increased 74.7% for the second quarter of 2013 compared to the second quarter of 2012. This increase is attributable to an increase in oil and gas production taxes which resulted from the increase in oil and gas royalty revenue discussed above.

General and administrative expenses for the second quarter of 2013 were down 2.0%, compared to the second quarter of 2012. This was primarily due to a decrease in dues and subscription expenses.

Results of Operations for the Six Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012

Earnings per Sub-share certificate were $1.18 for the first six months of 2013, compared to $1.24 for the first six months of 2012. Total operating and investing revenues were $16,680,787 for the first six months of 2013 compared to $18,286,817 for the first six months of 2012, a decrease of 8.8%. This decrease in revenue and earnings was primarily due to a decrease in land sales and, to a significantly lesser extent, a decrease in interest income from notes receivable. These decreases were partially offset by increases in oil and gas royalty revenue and easement and sundry income.

During the first six months of 2013 the Trust sold approximately 100.1 acres for a total of $331,588, or approximately $3,313 per acre. In the first six months of 2012 the Trust sold approximately 7,252 acres for a total of $5,809,747, or approximately $801 per acre.

Rentals, royalties, and sundry income were $16,055,569 for the first six months of 2013 compared to $12,104,019 for the first six months of 2012, an increase of 32.6%. This increase resulted primarily from increases in oil and gas royalty revenue and, to a much lesser extent, easement and sundry income.


Oil and gas royalty revenue was $10,352,473 for the first six months of 2013, compared to $6,762,080 for the first six months of 2012, an increase of 53.1%. Oil royalty revenue was $8,405,512 for the first six months of 2013, an increase of 49.9% from the first six months of 2012 when oil royalty revenue was $5,608,621. The average price per royalty barrel of crude oil during the first six months of 2013 was 12.9% lower than the average price prevailing during the first six months of 2012. This price decrease, however, was more than offset by an increase of 72.1% in crude oil production subject to the Trust's royalty interest in the first six months of 2013 compared to the first six months of 2012. Gas royalty revenue was $1,946,961 for the first six months of 2013, an increase of 68.8% from the first six months of 2012 when gas royalty revenue was $1,153,459. This increase in gas royalty revenue resulted primarily from a volume increase of 68.2% in the first six months of 2013 compared to the first six months of 2012, which was augmented by a modest price increase of 0.5% over the same period.

Easement and sundry income was $5,435,217 for the first six months of 2013, an increase of 7.2% compared to the first six months of 2012 when easement and sundry income was $5,072,105. This increase resulted primarily from increases in sundry lease rentals, pole line easement income, and pipeline easement income caused by an increase in drilling and exploration activity on land owned by the Trust. This category of income is unpredictable and may vary significantly from period to period.

Interest income, including interest on investments, was $293,630 for the first six months of 2013 compared to $373,051 for the first six months of 2012, a decrease of 21.3%. Interest on notes receivable for the first six months of 2013 was $287,450, a decrease of 20.8% compared to the first six months of 2012 when interest on notes receivable was $362,850. As of June 30, 2013, notes receivable for land sales were $7,288,537 compared to $10,182,840 at June 30, 2012, a decrease of 28.4%. Interest income earned from investments was $6,180 for the first six months of 2013, a decrease of 39.4% from the first six months of 2012. Interest on investments is affected by such variables as cash on hand for investment and the rate of interest on short-term investments.

Taxes, other than income taxes, increased 35.0% for the first six months of 2013 compared to the first six months of 2012. This increase is attributable to an increase in oil and gas production taxes which resulted from the increase in oil and gas royalty revenue discussed above.

General and administrative expenses for the first six months of 2013 increased 6.7% compared to the first six months of 2012. This was primarily due to an increase in legal expenses.

Liquidity and Capital Resources

The Trust's principal sources of liquidity are revenues from oil and gas royalties, lease rentals and receipts of interest and principal payments on the notes receivable arising from land sales. In the past, those sources have generated more than adequate amounts of cash to meet the Trust's needs and, in the opinion of management, should continue to do so in the foreseeable future.

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